Liability caps around the world: a global comparison

It is common around the world for representations and warranties in private M&A transactions to survive for an agreed upon period of time after closing. During this survival period, the seller is faced with the risk that the purchaser may bring an action against it for breach of a representation or warranty. There are a number of ways sellers can mitigate this risk, including negotiating a cap on their maximum liability under the purchase and sale agreement. What is considered “market standard” in terms of the use and quantum of these liability caps differs in jurisdictions around the world. In order to survey the market trends in this regard, we conducted a review of M&A deal studies prepared by Norton Rose Fulbright and studies by the American Bar Association which collectively covered private M&A transactions that closed in 2016 in the Asia-Pacific region (the APAC market)[1], private M&A deals completed in 2016 and the first half of 2017 in the…

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